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Saga of Privatization of Nat’l Football Clubs

The Iranian Privatization Organization (IPO) announced last week that the fourth round of auction to sell the two major state-owned football clubs, Perspolis and Esteghlal, had no winners as none of the bidders qualified, IRNA reported.

Mirali Pouri Hosseini, the IPO chief, said since the Board of Divestiture – composed of three ministers of sports and youths; economic affairs and finance; and justice – did not qualify any of the three bidders for Perspolis and the sole bidder for Esteghlal in terms of financial and technical requirements, the fourth auction came to nothing.

The IPO head added that the two clubs will continue to be run by the Sports Ministry and that a two-month recess has been considered for the two clubs to go through the summer transfer window and after the transfer season is over, the IPO would decide on a possible next auction.

The announcement put an end to more than 100 days of toil since the first auction was held on February 16 last year with no bidders. But the story of the two giant clubs is much longer.

Perspolis (known as The Reds) had a private owner before the 1979 Islamic Revolution but the club was put under the control of the Physical Education Organization (now the Sports Ministry) after the revolution. The other popular club Esteghlal (known as The Blues), formerly named Taj, met the same fate. Since then, the then Physical Education Organization has been running the two clubs and since the PEO’s head used to be directly appointed by the president, the policies in the clubs were directly set by politicians. However, since more than a decade ago, when the Asian Football Confederation insisted that professional football requires privatization of all sports clubs, no state-owned clubs would be tolerated and deadlines have been set for due reforms.

Following the AFC’s warning, different scenarios have been considered for the two clubs, including listing them in Tehran Stock Exchange or Iran Fara Bourse. But the clubs’ accumulated debts and their ambiguous financial situation prevented such scenarios from being realized. The parliament then passed a law based on which the two clubs had to be privatized through auction and the IPO was tasked to do so. Numerous expert meetings were held and the two clubs were valued at a total of 2.9 trillion rials ($100.6 million based on the official currency exchange rate) as the base price.

Quasi-Governmental Bidders

The first and second auctions had no bidders, making the officials revise the divestiture conditions to allow the potential winners to pay a sizeable portion of the amount on installments. After the third auction was held on April 29, two private sector companies placed their bids for The Reds while The Blues had no bidder. In the end, both bidders for Perspolis were disqualified due to different reasons.

The government, which has never been willing to abandon the clubs despite their high expenses and low output during the past years, felt the danger of losing the two clubs. As many analysts say, it brought in two quasi-governmental companies affiliated with the country’s two major auto-manufacturers Saipa and Iran Khodro.

Although the two companies, Nivan Ebtekar and Samand Investment Company, are private based on their statutes, almost everybody knew the two had been brought in the divestiture process so that the government could maintain its dominance over the two clubs which together have at least 50 million fans inside the country and a few millions in Asia.

A fourth auction was held and the two private companies made the highest bids for The Reds but as mentioned before, the auction bore no result.

Obstacle to Privatization

Apart from the government’s obvious disinclination to sell the two clubs, experts believe even if the two football clubs and other state-owned sports clubs are taken over by the private sector, nothing will change much in the national football, which is seen more as an industry today than a sport. There are insufficient infrastructures in Iran for the sports clubs to be economically successful. While major sports clubs around the world gain great share of their incomes from television rights, such revenue is almost non-existent in Iran.

During the past three football seasons, Football Federation of Iran’s officials have been in constant struggle with the Islamic Republic of Iran Broadcasting to receive significant amounts for TV rights. The struggle even led to temporarily suspending matches for two consecutive weeks last year.

Moreover, lack of appropriate copyright laws has prevented the clubs from earning revenue through selling shirts and other products.

In general, it is not feasible to own a private sports club in the country and the private sector bidders are trying to own the clubs mainly for fame. In short, a successful business in sports needs fundamental and infrastructural changes in many phases of economy and the political structure of the Sports Ministry.